User talk:Orangedolphin

Image:Comparison of real GDP using BEA Deflator vs real GDP using Money Supply.png : Please explain your calculations with GDP measured with money supply.

I'm almost sure your calculations are false and the graph irrelevant. MaCRoEco 18:37, 28 September 2007 (UTC)


 * Here are the calculations for Q1 1985... the Bureau of Economic Analysis tells us that nominal GDP is 8.5%, real GDP is 3.8%. Money supply data is from the St. Louis Fed. The relevant dates are: Q1'84: 2797.1, Q2'84: 2868.9 (2.57% growth), Q3'84: 2920.8 (1.81% growth), Q4'84: 3004.5 (2.87% growth), Q1'85: 3063.3 (1.96% growth). This tells us that annualised money supply growth is (1+2.57%)*(1+1.81%)*(1+2.87%)*(1+1.96%) - 1 = 9.52%.


 * So Real GDP (reduced by money supply not gdp deflator) is 8.5% - 9.52% = -1.02% (compared against 3.8%)

Bit of info on banking to try to help
If you put 100 bucks in a bank in an account insured by the FDIC, you can get your 100 bucks back even if the bank goes bust. Your deposit (loan to the bank) is insured by US taxpayers. When you deposit that $100, it's a loan from you to the bank. If you keep it in your pocket in cash, you're not lending it to the bank, you're keeping it to yourself for any use you choose.

Banks reserve something like 10% of all deposits (loans from all depositors) so that they can give cash back to depositors on demand. The other 90% or so is lent out for home mortgages, business loans, that sort of stuff. That's what fractional reserve is about -- you lend $100 to the bank, and the bank lends $90 or so to people who want to borrow your money via your bank.

It might seem like this system couldn't work, but it works as long as people keep putting money (savings) in the banks -- technically, lending money to the banks. If everyone keeps withdrawing all their cash from the banks every week or month, it wouldn't work. It works because people try to "save" or store money by stashing it in bank accounts for future use. It works fine as long as people (in the mass) tend to "save" (lend to the bank) more than they spend (withdraw from the bank). Historically, most people put aside or saved money as best they could for a rainy day, so the banks generally had cash available to lend for mortages, etc.

This system only works if people -- on average -- "save" more than they "consume". It's a game of averages or statistics. If everyone uses all the dollars they earn -- plus borrow more dollars from banks -- the system collapses. Banks depend on deposits -- they depend on the tendency of individuals to use banks to store savings. As long as people lend their money to banks, banks can lend that money for mortgages and such. If people don't lend their money to banks, the banks can't lend for mortgages and such things.

I'm not sure I've explained this well, but I'm just trying to help, so I hope that's okay. --Foggy Morning (talk) 02:30, 24 January 2008 (UTC)


 * You have explained it very well, but it's a difficult system to explain (in this way) because the arguments don't tie together. Very often I see it said that the system would collapse if a certain amount of people took their money out of banks. This is not the case (I'm not sure how people who think this sleep at night, they must worry). It is perfectly possible for all the people to withdraw all their money from all banks at all times. This is because bank credit can be exchanged for physical money, at all times.


 * You say here that when we deposit money with a bank it is the same as loaning the money to the bank. This is not the case. If it were a loan to the bank what you would be describing would be full-reserve banking. Let me explain, in full-reserve banking we put money into the bank for safekeeping as a deposit. The bank is not entitled to touch that money. The bank would not be able to use any of that money to make loans. But the customer may wish to earn a return on the deposits and so may choose to lend the money.


 * The customer may choose to use the bank as an intermediary between him/herself and the person borrowing the money. This is the situation you describe, where the depositor lends the money to the bank and the bank lends it on to another customer (in your example only 90%).


 * Thanks for taking the time to post a message. Orangedolphin (talk) 00:08, 25 January 2008 (UTC)


 * I'm sorry, but I don't think you understand how banking works. If you put your money in the bank and it's not loaned (at interest) to a borrower, the bank can't pay you interest on your deposit.
 * Under a full-reserve system, unless you asked for your money to be loaned out, you would be paying safekeeping fees so the savings rate would actually be negative. Your money would diminish over time.
 * The money you put in a bank is a loan from you to the bank. If you don't want to lend it, you merely stash it in your cookie jar for a rainy day. Deposits in bank accounts are recorded as liabilities on the bank's balance sheet and assets on the depositor's balance sheet.
 * In most Western countries we have double-entry bookkeeping, which means that deposits are recorded on both the assets side and the liabilities side.
 * If you want to understand this better, read Benton Gup's book The Bank Director's Handbook (ISBN 1557387923). It gives a good summary of the basics of banking. --Foggy Morning (talk) 05:24, 25 January 2008 (UTC)
 * Why would I want to read a book which leaves the reader with the wrong impression of banking (presumably you have read the book)? Orangedolphin (talk) 05:44, 25 January 2008 (UTC)


 * Good luck understanding this, and very sorry I can't help you more. --Foggy Morning (talk) 06:07, 25 January 2008 (UTC)


 * That's OK. There are very few authoritative sources on this issue (in my view), which is I guess a source of the frustration. Orangedolphin (talk) 11:37, 27 January 2008 (UTC)


 * No offense intended, but people who are interested in editing Wikipedia are not necessarily interested in tutoring individual editors. I'm sorry that my previous comment suggested that I would tutor you -- I was just trying to help you with some basics. I suggest you study banking more before you edit articles or initiate banking-related discussions.  Just a sugestion. --Foggy Morning (talk) 04:10, 28 January 2008 (UTC)

Fractional-reserve banking
About your arguments at Fractional-reserve banking. First, you should understand that the standard for inclusion in Wikipedia is "Verifiability, not Truth". It's no use arguing about what's true, that way lies madness. 'Truths' are often open to endless dispute, whereas facts and citations can be verified. So, until you can find reliable sources that back up your position, it will be removed from Wikipedia by me, and by any other editor in good standing, as unverified WP:POV. That said, let me argue my position a little. Keep in mind though, that just because you are not convinced by my arguments, th.is does not give you permission to introduce unverified material into an article. So, in reply to your arguments: 1. but banks don't need to be in receipt of deposits to be a fractional-reserve bank, they can simply make loans This is incorrect. Banks, by government regulation and by practice, do not lend out more than the deposits they hold. Actually, they lend out less, because they maintain a fraction of those deposits as cash. If you don't believe me, go ask any person who works in a bank, or check out any banking textbook. 2. Not if the deposit accounts are locked up as in the case of time deposits... The definition of fractional reserve banking (again, check out any banking textbook), is that it is the practice of keep a fraction of total deposits, including time deposits. --LK (talk) 02:30, 23 September 2009 (UTC)
 * Orange dolphin

It would help me if you do not play into Lk's hands by changing my edits and not supporting your own with citations as is the policy of wiki.


 * Earlier you said "but banks don't need to be in receipt of deposits to be a fractional-reserve bank, they can simply make loans"


 * It is true that a FRB does not need retail deposits already available to create loans, but after such a bank has created a loan it will have to provide reserves to other banks and will be obliged to get loans which are called deposits.  So loans leads deposits rather than the version LK wishes to support.


 * Please try it all possible for you to cooperate with me rather than removing my edits. Remove instead those of LK and those who delete mine.     Thanks Andrewedwardjudd (talk) 09:22, 5 May 2011 (UTC)andrewedwardjudd

test

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